Tokyo stocks gain on Wall St. recovery

Investors cautious as war in Iraq heats up; dollar eases

MarikoAndo

TOKYO (CBS.MW) -- Wall Street's gains buoyed Tokyo stocks Wednesday, but other major markets were mixed as investors remained cautious with the war in Iraq far from over.

In Tokyo, the Nikkei Average rose 113.16 points, or 1.4 percent, to end at 8,351.92. The broader Topix was up 1.1 percent at 821.43.

Markets in Singapore and Australian also gained ground, but weakness in travel-related stocks sent Hong Kong lower.

The dollar, meanwhile, eased to 119.95 yen in Asia action, against 120.15 yen in New York late Tuesday.

Gold and oil prices rose after U.S. Defense Secretary Donald Rumsfeld said the U.S.-led campaign to remove Iraqi President Saddam Hussein from power may take days, weeks or months as coalition forces continued facing Iraqi resistance and harsh sandstorms as they tried to advance toward Baghdad.

Investors remained alert to the risk of setbacks as American and British troops fought what appeared to be the biggest ground battle since the war began last Thursday. See full story.

Spot gold rose to $329.10 per ounce, up 80 cents from the New York close.

Crude oil rose as much as 1.7 percent to $28.44 a barrel in after-hours electronic trading on the New York Mercantile Exchange before retracting slightly to trade at $28.40 a barrel in Singapore.

In Japan, market players were also concerned about possible earnings warnings from companies due to losses on their stock holdings. Trading volume on Tokyo Stock Exchange's main section fell to 710 million, against Tuesday's 798 million.

"While the Iraq war-induced rally has driven a 5 percent rebound in TOPIX since March 11, the fact that many stocks are still trading more than 50 percent below March 2002 levels has raised concerns about potential downward earnings revisions arising from asset impairment accounting in March 2003," Goldman Sachs said in its research note on Wednesday.

The brokerage firm said that sectors with the largest ratios of estimated asset-impairment-related valuation losses of non-bank stock holdings relative to forecast recurring profits in March 2003 included nonferrous metals, securities, services, insurance, trading/wholesale, and electrical machinery.

On Wall Street, buyers returned after a one-day retreat, emboldened by the lack of any new setbacks for the allied forces in Iraq as their march toward Baghdad remained "on track." The Dow gained 0.8 percent, while the Nasdaq surged 1.5 percent.

Japan banks

On Tuesday, investors were disappointed with the central bank's decision to increase its purchases of shares held by banks to 3 trillion yen ($24.85 billion) from the current 2 trillion yen. Media reports had pegged a figure in the 4-trillion yen range, which would be used to buy the shareholdings of banks before the close of corporate books at the end of the year.

"Markets were disappointed by the central bank's announcement, as many had been hoping for aggressive easing in the form of liquidity boosting measures," said Korman Tam, analyst at MG Financial.

Some Japanese banks are taking novel approaches to deal with the issue of depreciating shareholdings ahead of book closings at the end of the year.

The Nihon Keizai Shimbun reported that Japan's UFJ Bank
UFJHF
(8307) is transferring its shareholdings to a new company it will create in the first half of fiscal 2003 in order to reduce the effects of fluctuating stock prices on the earnings of the parent bank unit.

The UFJ group will initially transfer 500 billion yen {$4.20 billion) of its more than 2 trillion yen of shares into the company, the report said. UFJ shares rose 3.45 percent to 120,000 yen. Bigger rival Mizuho Financial Group (8411) was up 0.2 percent at 96,100 yen.

Among other notable movers, shares of Japan Airlines (9205) lost 2.3 percent to 255 yen. Japan's No.1 carrier has decided to slash the number of its international flights to stem the negative impact of the Iraq, local media reported. Rival All Nippon Airways (9202)
ALNPY, -0.41%
descended 8.1 percent to 237 yen.

Seoul, Hong Kong ease

Chip giant Samsung Electronics
SSNGY, +0.00%
lost half a percent to 304,500 won. Shares opened sharply higher after the company announced late Tuesday a plan to invest $1 billion over two years in a new flat panel display production plant as the company tries to boost its business in the TFT (thin film transistor) and LCD (liquid crystal display) markets.

The new plant is already under construction and initial production is scheduled for the end of this year. The line will be capable of producing 60,000 fifth-generation glass substrates per month when it's in full operation in the first half of 2003.

Cathay Pacific Airways
CPCAY, +2.86%
(0293) declined 1.3 percent to HK$11. Shangri-La Asia (0069)
SHALY, -2.88%
one of the largest luxury hoteliers in the region, tumbled 4.4 percent to HK$5.45 -- hit by a falloff in travel due to the war in Iraq and a mystery flu outbreak. Read China pulse.

Shares of Sinopec (0386), which is due to announce fiscal 2002 business results on Friday, gained 2.8 percent to HK$1.47. Analysts are forecasting the company will announce a 2002 net profit of HK$15.6 billion.

BHP sells Argentina mine stake to Wheaton

BHP Billiton
BHP, +0.40%
picked up 0.9 percent to A$9.40. The resources giant said its fully owned subsidiary Rio Algom has agreed to sell its 25 percent stake in Argentina's Alumbrera copper-gold mine to Wheaton River Minerals for $180 million.

Under the deal, Wheaton may defer up to $50 million of the purchase price until May 30, 2005. Any deferred payment will carry an interest rate 2 percent above LIBOR. At least $130 million will be payable when the transaction closes, expected in June, BHP Billiton said in a statement.

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